AT&T Inc. (NYSE: T | T Price Prediction) is rewarding its shareholders once again with a quarterly dividend of $0.2775, payable on Monday, Feb. 3. That is the same as in the prior payout. The company recently reported strong quarterly results, boosted in part by strong subscriber growth. The ongoing dividend payment underscores the management’s commitment to delivering consistent value to investors.
Why Investors Like Dividends
Dividend stocks offer two benefits.
Investors favor dividend stocks for two main reasons. The first is that they offer enticing total return potential. Total return is a comprehensive measure of investment performance that includes interest, capital gains, dividends, and distributions realized over time. In other words, the total return on an investment or a portfolio consists of income and stock appreciation. It is one of the most effective ways to boost the prospects of overall investing success.
Dividend stocks can also provide investors with a steady, reliable stream of passive income. Passive income is money that is earned with little to no ongoing effort, usually from assets that generate cash flow. This income can come from a variety of sources, including stock dividends. Generating passive income is a desirable financial strategy for those seeking to diversify their income streams or achieve financial independence.
AT&T’s Dividend
A former Dividend Aristocrat.
AT&T used to be a Dividend Aristocrat, which is an S&P 500 company that had increased its payout annually for at least 25 years. That changed in 2022 when its quarterly dividend dropped from $0.52 per share to $0.2775, where it has remained since. The cut was part of an effort to reduce the company’s debt and included spinning off its WarnerMedia business.
The current dividend yield is about 4.6%, which is not far off the industry average but well above the sector average. Competitor Verizon Communications Inc. (NYSE: VZ) has a yield of almost 7%. AT&T’s share price is less than 3% lower than a decade ago, so it has not offered investors any growth in that time to go with the income.
AT&T, the Company
One of the largest telecommunications companies in the world.
The company provides telecommunications and technology services worldwide. Its Communications segment offers wireless voice and data communications services, and it sells handsets, wireless data cards, wireless computing devices, carrying cases/protective covers, and wireless chargers through its own company-owned stores, agents, and third-party retail stores.
This segment also provides Virtual Private Networks, AT&T Dedicated Internet, Ethernet, data services, cloud solutions, outsourcing, and managed professional services, as well as customer premises equipment for multinational corporations, small and midsize businesses, governmental, and wholesale customers. In addition, it offers broadband services, including fiber connections, legacy telephony voice communication services, and other VoIP services and equipment to residential customers. And the segment markets its communications services and products under the AT&T, AT&T Business, Cricket, AT&T Prepaid, and AT&T Fiber brand names.
The Latin America segment provides postpaid and prepaid wireless services in Mexico under the AT&T and Unefon brand names, as well as sells smartphones through its owned stores, agents, and third-party retail stores.
Its headquarters are in Dallas. The company was incorporated in 1983 as SBC Communications, one of the companies created by the breakup of the prior AT&T monopoly. It went public in July of 1984, and it changed its name in 2005. Now it competes with or is similar to, among others:
- Charter Communications Inc. (NASDAQ: CHTR)
- Comcast Corp. (NASDAQ: CMCSA)
- Frontier Communications Parent Inc. (NASDAQ: FYBR)
- T-Mobile US Inc. (NASDAQ: TMUS)
- Verizon Communications
- Vodafone Group PLC (NASDAQ: VOD)
AT&T stock got a boost when it recently posted strong fourth-quarter results, boosted in part by strong subscriber growth. The company also recently offered customers discounts for outages, and it fended off the Salt Typhoon Chinese cyberattack. It was also affected by a data breach at Snowflake last year.
AT&T, the Stock
Wall Street is optimistic.
The share price is 4% or so higher than five years ago, underperforming the Dow Jones industrials. In the past year though, its more than 44% gain is greater than that of the S&P 500. Shares just hit a multiyear high of $24.98. The $26.62 mean price target indicates about 11% upside in the 12 months. The consensus recommendation of analysts is to buy shares, with seven of them having Strong Buy ratings. Bernstein and RBC Capital recently reiterated their Outperform ratings.
Institutional investors hold more than 62% of the shares. BlackRock, State Street, and Vanguard have notable stakes. Note that more than 88 million shares, or more than 1% of the float, are held short. Also, there have been no notable insider transactions in the past few months.
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